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A kink in an otherwise linear demand curve. Note how marginal costs can fluctuate between MC1 and MC3 without the equilibrium quantity or price changing. The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
Sweezy did pioneering work in the fields of expectations and oligopoly in these years, introducing for the first time the concept of the kinked demand curve in the determination of oligopoly pricing. [3] Harvard published Sweezy's dissertation, Monopoly and Competition in the English Coal Trade, 1550–1850, in 1938.
The graph below depicts the kinked demand curve hypothesis which was proposed by Paul Sweezy who was an American economist. [29] It is important to note that this graph is a simplistic example of a kinked demand curve. Kinked Demand Curve. Oligopolistic firms are believed to operate within the confines of the kinked demand function.
This model predicts that more firms will enter the industry in the long run, since market price for oligopolists is more stable. [56] The kinked demand curve for a joint profit-maximizing oligopoly industry can model the behaviors of oligopolists' pricing decisions other than that of the price leader.
In order to distinguish themselves well, these firms can compete in price, but more often, oligopolistic firms engage in non-price competition because of their kinked demand curve. In the kinked demand curve model, the firm will maximize its profits at Q,P where the marginal revenue (MR) is equal to the marginal cost (MC) of the firm.
President-elect Donald Trump on Wednesday shone a spotlight on the debt ceiling, rejecting a bipartisan government funding deal negotiated by House Speaker Mike Johnson and demanding lawmakers ...
The Theory of Capitalist Development is a 1942 book by the Marxian economist Paul Sweezy, in which the author expounds and defends the labor theory of value. [1] It has received praise as an important work, but Sweezy has also been criticized for misrepresenting Karl Marx's economic theories.
Major alcohol companies have been bracing for a culture shift favoring nonalcoholic options. Consumers under 30 tend to buy less alcohol and drink less often.